Today’s content is a lesson I learned during my own trading process, which cost me 300,000.
I wanted to quietly accept it myself, but the day before yesterday, when the ETH price reached 4887 USD, two internal students also encountered this problem.
For this reason, I decided to share the lesson I learned from spending 300,000 this year in the first half with you.
At least you understood that in the process of trading large amounts of money, you could lose at least 300,000 less!!!
Have you encountered this kind of problem in the contract orders?
Why wasn’t its order on Binance stopped out for profit?
Why? The price on the K-line has clearly already reached.
But it just didn’t take profits???
Why? The price hasn’t reached, yet I’ve been liquidated?
Why?
First, partners encountering such issues in profit-taking are actually very top-notch players in trading.
Because for an asset like ETH, it is normal for such a situation to occur, and usually the maximum price difference of ETH does not exceed 2 dollars, typically around 1 dollar.
So where is the problem?
The answer lies in the difference between “mark price” and “latest price”.
Today, Yongqi will conduct an in-depth analysis based on the latest contract rules from Binance and her own painful experiences.
- Binance exchange has three pricing systems.
In Binance contracts, the price is not singular, but rather a “three-layer structure”:
1️⃣ Index Price: A weighted average from multiple spot exchanges, serving as the “fair anchor.”
2️⃣ Mark Price: The smoothed price adjusted by index price plus premium/funding rate. Mainly used for: liquidation determination and unrealized profit and loss calculation.
3️⃣ Latest Price: This is the actual transaction price in the market, which determines whether an order is executed, and it is also the price displayed on the candlestick chart.
Key point: These three prices are different at the same moment, and sometimes the difference can be quite large during extreme market conditions!
Especially during periods of extreme volatility, this is why sometimes your orders are not filled at take-profit levels, and why it seems like liquidation happens too early, or the price has already fallen below but you haven’t been liquidated!!!
Second, let’s take a look at what my 300,000 lessons are like?
This happened in the first half of this year, during the Ethereum rebound to 2860!
This is the marked price I entrusted at that time: ETH contract price 2858 USD.
In the exchange’s K-line, the price reached: 2860.59 US dollars on that day.
Moreover, I placed the order at the price three days in advance, and on February 21, the price reached the night of the 23rd. After consulting customer service at noon on the 24th, I canceled the order.
This is an explanation during the consultation process for Binance clients.
and detailed records:
Then you guys take a look at the key points:
The image below is what the Binance customer service sent me in the chat log above.
I was displaying the marked price at that time:
The highest mark price of Binance is: 2852.87 USD
The highest price for spot trading is: 2860.59 USD
And my order price three days in advance was: 2858 USD
The spot price is already 2860.59, so there’s no reason for my contract at 2858 not to be executed!
But the reality is there is a gap of exactly 8u, causing me to lose so much, and the profit of 235500u was spent learning a lesson.
This is the lesson learned from not researching the rules in advance.
- Which price should be used to trigger take profit and stop loss?
Binance allows take profit/stop loss trigger price source:
Trigger for marked price: stable, not easily triggered by spikes.
Latest price trigger: Closer to the market, suitable for short-term breakthroughs
Yongqi suggests:
High-frequency/Breakthrough Trading: Use “Latest Price Trigger”
Swing/Trend Trading: Triggered by “Marked Price”
Why is it that during liquidation, even though the spot price has clearly fallen below, your order has not been liquidated?
If the “latest price” is used to determine liquidation, then a single “spike” could wipe out a healthy position.
However, Binance uses the marked price to determine liquidation, avoiding being adversely affected by abnormal transaction prices.
What are the common operational mistakes during the trading process?
Error 1: Treating the marked price as the index price
Correct: Marked price ≠ Index price, but rather Index price + Premium adjustment
Error 2: All stop losses are accurate only when using the latest price.
Correct: Using the marked price to trigger in a highly volatile market is more stable
Error Three: The liquidation price is the K-line price.
Correct: The settlement price is based on the marked price.
- Conclusion
The marked price is the “North Star” of risk control, while the latest price is the “pointer” of transactions.
In this way, your contract trading can upgrade from “relying on intuition while watching the market” to “a systematic approach with rules to follow.”
The market is never forgiving of your ignorance.
What you take for granted is often the beginning of a loss.
The rise and fall of prices can be seen by everyone, but what truly determines profit and loss are the rules.
Without understanding the rules, even if you make money occasionally, it is merely luck;
Understanding the rules is the true amulet to avoid being harvested by the market.
In the world of contracts:
The marked price is rational.
Latest price is desire
Only by finding a balance between reason and desire can trading go further.
⭐Star #B Circle’s Yongqi, good content not to be missed⭐
In conclusion: Many of the viewpoints in this article represent my personal understanding and judgment of the market and do not constitute investment advice for you.
